Korean Job Discussion Forums

[bacasper]

Not sure about the dollar and the euro.

Yuan Poised to Become Reserve Currency, Goldman�s O�Neill Says

By Keith Jenkins

March 19 (Bloomberg) -- China�s yuan is destined to become a global reserve currency rivaling the dollar and the euro, as the nation�s economic power increases the currency�s allure, said Jim O�Neill, chief economist at Goldman Sachs Group Inc.

The Chinese government will �eventually� allow the yuan, or renminbi, to trade freely on foreign-exchange markets, dropping the system under which it controls its value, O�Neill wrote in an essay that formed part of a report published today for Chatham House, a London-based foreign affairs research organization.

�As China moves in this direction, other large emerging economies will presumably gradually move in the same direction and the end result will be something approximating to today�s Western monetary system,� London-based O�Neill wrote. �Under such a system, the renminbi, dollar and euro would all form the linchpin of the world�s currency markets.�

China is likely to overtake Japan as the world�s second- largest economy this year, said O�Neill, who coined the term BRICs to describe Brazil, Russia, India and China in 2001. In the next decade, along with other large emerging economies, the size of China�s economy will approach that of the U.S., he wrote.

continued at link

[Ya-ta Boy]

Isn't this an inevitability at some point?

[Reggie]

A basket of commodities should become the real "reserve currency." The past ten years and the next ten will hopefully sour people's opinions of paper, the fraudulent opportunities and dangers associated with non-tangible items, and the corruption associated with paper reserve currencies.

[TheUrbanMyth]

If the Chinese were actually preparing for what O'Neill said they would be doing...they'd be selling Treasury bills. But they are the single largest foreign holder of such bills.

The dollar will retain its global status for the foreseeable future.

[mises]

[quote="TheUrbanMyth"]

[TheUrbanMyth]

[quote="mises"]

[mises]

If the USD was not a doomed currency, there would be no reason to search for a replacement. It is a doomed currency, so the search is on. The SDR's are supported by the international banking establishment and not strongly opposed by the US (the IMF is an arm of the US). The dollar is down 34% since 2002. Why would the rest of the world continue to use a rapidly depreciating asset as the basis for their international transactions? That the SDR is being readied for this role is not a secret and not being done in secret.

[TheUrbanMyth]

[mises]

The United States now (after this health bill) has 100 trillion in liabilities. The GDP is 14 trillion. The boomers are retiring. They are also broke, fat, sick and entitled. The country is replacing a high earning middle class demographic with a lower earning lower-middle class demographic. The middle class is a net-gain to the system. The lower-middle class is a net drain. Every single possible metric of near to medium (and long) term economic viability is screaming catastrophe. It's too bad. I really like the US. But she's going to become a high tax, high inflation, low quality of services country.

The dollar will be decreased in value dramatically. This is what the establishment economics profession considers a fix to liabilities. The Bretton Woods 2 system will die. It couldn't last. Like all of Keynes's ideas. The dollar is the reserve only because the dollar is the reserve. There is no economic justification for it anymore. Such a dramatic change in the international financial architecture would create extreme dysfunction at this time. When macro stability returns, the dollar's global role will be diminished.

[bucheon bum]

Well as long as the Yuan is pegged and Beijing keeps its present monetary policy, this GS guy isn't going to be right.

[chungbukdo]

Mises, I would have PM'ed you but I have under 25 posts.

I was wondering what you think the outlook for Canada would be like if the US loses its reserve currency status because of inflating their currency to pay off liabilities?

[jaykimf]

[jaykimf]

[The Happy Warrior]

Hype, hype, hype, hype the China market.

[brickabrack]

I'm no trends forecaster, but I see the same thing happening in Asia that has happened in N Am and Europe over the past 2-3 years. The cycle is just running a bit behind.

Brasil and a select few African countries may be the only nations not hit hard by economic downturns. Lots of China hype, for sure. I can't access the link for some reason, but I'm sure I've read 10 articles just like it.